The U.S. Housing Market Faces Cooling Trends
The U.S. housing market is showing signs of cooling, with house prices declining in an increasing number of metropolitan areas. This development has raised concerns among economists, who view it as a potential risk for the sector and the broader economy.
According to the Zillow Home Value Index, which tracks monthly changes in home prices and housing market trends, national home prices rose by 0.2 percent year-over-year in June. This represents a significant slowdown from the 3.2 percent increase recorded over the previous 12 months. While the overall trend remains positive, the pace of growth has clearly decelerated.
A growing number of metro areas are now experiencing falling home prices. An analysis by ResiClub of the Zillow report revealed that 110 of the nation’s 300 largest housing markets (or 36 percent) have seen home prices decline since June of last year. This is a stark contrast to the 31 markets reported in January, indicating a rapid shift in the market dynamics.
Why This Matters
Falling home prices can have both positive and negative implications. On one hand, they improve affordability, potentially allowing more renters to transition into homeownership. However, this comes at a cost for existing homeowners, many of whom consider their homes their largest financial asset. If prices continue to fall, some homeowners may delay selling their properties to avoid losses, which could lead to reduced inventory and a slower housing market.
Moreover, a cooling housing market can signal deeper economic issues. Certain economists have warned that this trend could be a precursor to a broader economic downturn. The interconnected nature of the housing market and the wider economy means that any prolonged decline in home prices could have far-reaching consequences.
Key Insights from Recent Data
ResiClub’s analysis of Zillow reports shows a steady increase in the number of markets where prices are falling. From 31 markets in January, the count rose to 80 in March and reached 110 in June. Major declines have been observed in cities such as Austin, Texas, where prices dropped by 5.8 percent year-over-year, as well as Tampa and Miami, Florida, with declines of 5.7 percent and 3.8 percent respectively.
Despite these declines, prices continue to rise in certain areas, particularly in the Northeast and Midwest, where inventory levels remain low. This suggests that while some regions are experiencing price drops, others are still seeing upward trends.
Recent research by ICE, a mortgage data and technology firm, found that annual home price growth slowed to 1.3 percent in June, down slightly from May. The report also noted that 30 percent of the largest markets saw prices drop by at least one percent from recent peaks. Andy Walden, vice president of research and analysis at ICE, attributed this trend to increased inventory levels, which improved affordability but made many homeowners hesitant to list their properties.
Rising Inventory Levels
Housing inventory has surged in 2025, according to Realtor.com. The number of active listings grew from 829,000 at the start of the year to nearly 1.1 million in June. This follows a sharp decline during the COVID-19 pandemic, when listings fell to a low of 347,000 in February 2022—the lowest level since Realtor.com began tracking monthly data.
The increase in available homes has put downward pressure on prices, making it more challenging for sellers to find buyers. This dynamic has led to longer selling times and lower offers, further contributing to the cooling market.
Expert Warnings and Concerns
The prospect of further price declines has prompted warnings from industry experts. Mark Zandi, chief economist at Moody’s Analytics, issued a “red flare” warning for the U.S. housing market. He cited persistently high mortgage rates as a key factor, noting that these rates could continue to impact prices, construction, and sales.
Zandi wrote on X that housing will soon become a major headwind for broader economic growth. He added that this development, along with other factors, raises concerns about the economy’s outlook for the remainder of the year and into the next.
Perspectives from Industry Leaders
Andy Walden, head of mortgage and housing market research at Intercontinental Exchange, highlighted the competing forces at play in the current market. He noted that while rising inventory levels are helping to make homes more affordable, falling prices and longer selling times are causing some homeowners to hesitate about listing their properties.
Mark Zandi also emphasized the challenges posed by high mortgage rates, stating that they are significantly reducing demand. He pointed out that locked-in homeowners may eventually need to move, but they can only delay this for so long given their demographic and job situations.
What Comes Next?
Federal Reserve Governor Adriana D. Kugler recently stated that the future of the housing market depends “materially” on the country’s uncertain economic outlook. As the market continues to evolve, the interplay between supply, demand, and broader economic conditions will be critical to watch.
The housing market’s trajectory will have lasting effects on both individual homeowners and the national economy. With ongoing shifts in pricing, inventory, and buyer behavior, the coming months will be crucial in determining the direction of this vital sector.
